Founder and CEO of ERG Enterprises. Nationally recognized thought leader on entrepreneurship, investing and leadership.
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Making a leadership mistake can be costly—very costly.
Consider employee turnover, a metric strongly correlated with leadership effectiveness. For every employee who leaves, it can cost one-half to two times their annual salary to replace them, according to Gallup. Multiply this across an organization of 200 people, and you're looking at potentially millions of dollars.
And that's just the cost of turnover, not overall performance, sales, marketing or customer service—not the countless areas leaders influence positively or negatively.
If you lead an organization, then this article might be worth your time. It examines four mistakes that I've commonly seen leaders make in my two decades of experience as a commercial investor and serial entrepreneur. Here's what they are and how to avoid them.
1. Focusing On Self-Achievement
While introspection and self-assessment are the responsibilities of every effective leader, your primary concern shouldn't fall on making yourself better; you should focus on helping those around you improve. That means recalibrating your focus from individual to team performance.
This challenge often affects individuals stepping into new leadership roles. When I started my career as an entrepreneur, I was making the transition from running a solo hand surgery practice to leading a hospital employing dozens of doctors, nurses and staff. Success no longer just meant delivering excellent care to my patients. It meant creating an institution that systematically and sustainably delivered great care while making money in the process.
To focus on the performance of the collective:
1. Redefine your success metrics. Leadership success should be tied to organizational performance. Think of profit and loss statements and the balance sheet as your scorecard.
2. Acknowledge the importance of the team. No founder or entrepreneur built a successful company on their own. Still, I meet many young or new founders who challenge themselves to do so. They don't realize that they'll only go as far as the talent they acquire and the team they build and retain.
2. Acting On Impulse
When you act on impulse, you create far-reaching and long-lasting consequences. That's why it's important to act with patience, calculation and intention. Rarely do leaders face a decision that needs to be made in the moment; you can take time to assess the implications of your action or inaction.
This is the thesis of Charles Fred's book, The 24 Hour Rule: Leading in a Frenetic World. Fred examines the tendency of leaders to act impetuously, driven by 24/7 communication and cultural influences that admire unsustainable work habits. The book argues that leaders should adopt the discipline of pausing—taking conscious and deliberate time to avoid impulsive decisions.
To stave off your impulses, I recommend you:
1. Understand the realistic timeline. Assess the true deadline for your decision.
2. Realize your impulse triggers. Inventory when you're most susceptible to acting on impulse and avoid making decisions during this time.
3. Inventory the implications of your decision. Acting on impulses is not always bad. If the situation is routine and the stakes are low, taking immediate action might create value.
4. Find the balance. Balance Nos. 1 and 3 to create your decision timeline and stick to it.
3. Never Discovering Your "Reset" Point
Leadership is analogous to running a long, grueling marathon. At times, it can feel miraculous; at others, it can seem daunting and exhausting. A reset point enables you to find internal balance, recalibrate and refresh your mind and continue the charge.
You should find a reset point both for the short term and long term. Short-term examples might include exercise before work, morning meditation, family time, reading or reflection. Long-term avenues could include vacation, new hobbies or new interests. For me, I never miss a family vacation. I also reserve the early mornings for meditation, a practice that has served me well in the boardroom and operating room.
To create your reset point:
1. Focus on your energy. Choose the activities that replenish your mental and physical energy.
2. Focus on your motivation. Your reset point should keep you motivated to perform at the highest level.
3. Focus on your discipline. Your day can quickly unravel if you miss the routines that hold everything together. Identify one or more of those activities, as these represent your reset point (or points).
4. Over-Rewarding Or Under-Rewarding Employee Contributions
Positive reinforcement is necessary to enhance employee performance. Your people need to know you appreciate their contributions beyond compensation.
Still, positive feedback has its time and place. By using it intentionally and deliberately, you can maximize the productivity of your team. But if you leverage it too frequently, you can create a sense of complacency, build unhealthy expectations and diminish performance.
Recognition is a tool of influence you should use wisely. But doing so is not as complex as it might seem. At my company, for example, I recognize employees when they follow best practices and exceed expectations in their performance. In other words, I value process and performance, regardless of the end result. That's because employees can control the first two factors but not always the third.
To reward appropriately, consider:
1. Process: What process did your employee follow to achieve the outcome? Was it established and recommended, or was it spontaneous and unreplicable?
2. Performance: Does their performance exceed what's expected and considered the baseline? How frequently does it occur at this level?
3. Value: If replicated, would this performance event create significant value for your organization?
If the process is sound, the performance superior and the value high, give recognition to your employee or team.
Maximizing Your Leadership ROI
By avoiding these four mistakes, you create the conditions for your team and organization to thrive. You also avoid the costly mistakes that cause many organizations to stagnate, shrink or sink.
These are by no means the full extent of mistakes we, as leaders, can make. But they are some of the most important ones I've witnessed in my career, especially among new leaders and entrepreneurs.
Acknowledge these missteps, remember them and use them to get the most from your team and, most importantly, from yourself.
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